Small cap stocks tumbled today, losing 1.23% and far exceeding losses incurred on the other major indices. Since Monday's close, the Russell 2000 has dropped approximately 3% while the benchmark S&P 500 has retreated less than 1%. One hallmark of a bull market is the outperformance of small cap stocks relative to the S&P 500. It's a signal that market participants are in "risk on" mode. The past three days that has not been the case. It's not a sign to panic, but it is beginning to raise my eyebrows. The following shows relative strength in the Russell 2000 throughout 2016, but a sudden reversal this month:
The action on Thursday broke both trendline support and absolute price support. There is further price support just below 1190, which is exactly where the Russell 2000 closed today. Tomorrow begins a very bullish historical period for U.S. stocks and, based on this chart, it's fairly important to see the Russell 2000 begin to outshine the other indices right away.